Credit Repair

Credit repair’ companies seem to abound on the radio, the internet and on late night TV. You probably have at least the following questions and observations about them.

Do They Work?

How Do They Work?

Without Success How Are These Companies Able To Pay For Their Advertising?

Post-Bankruptcy Issues

Well, let’s address these one at a time…

Do They Work?

It depends upon what you mean by “work.” (Sounds like a famous president, huh?) They certainly don’t work the way they claim (“remove all negative information from your credit history;” “increase your credit scores instantly;” erase late pays, repossessions and foreclosures from your credit report;” etc.). They can only erase them if they are erroneously on you credit report in the first place. This is kinda’, sorta’ what you will read in their advertising literature:BIG PRINT : WE WILL QUICKLY REPAIR YOUR CREDIT AND ERASE ALL THE BAD STUFF(little print) but only the stuff that should not have been there in the first place.

At best, these credit repair companies’ ads are misleading. At worst they are downright lies (some companies do not even provide the fine print; certainly not in their radio and internet ads.) In any event, you don’t need to spend any money on them, because you can do on your own what they claim to be able to do for you. They charge fees. You don’t need to pay any fees.

How Do They Work?

After you send them your money, they will send you essentially the following information (using many more pages and words than I am going to use):

Contact the three credit bureaus (links provided below) and get your most up to date credit history.

Read the histories carefully for accuracy. (These companies, and the creditors who report information to them, can and do make mistakes.)

Challenge any inaccuracies.

Actually, some companies will provide you (for your fee) your credit reports directly to you (step 1), and will mail the “request for correction” forms on your behalf to the credit bureaus (step 3). But the cost for that service (many times the actual cost of the report) far exceeds the real benefit to you.

The companies will also provide you the following advice, again in many more pages and words: Pay your bills on time in the future and shortly, but no later than 7 years, all of your “bad information” will fall of your credit report. Guaranteed! Zounds. Can they really guarantee that? Well, yes, because after seven years, bad credit info (other than bankruptcy, which stays on for 10) automatically, by law, can not be reported. So, you see, nothing is being done by these companies that you cannot do yourself.

Without Success How Are These Companies Able To Pay For Their Advertising?

Well, they may be successful, but that has nothing to do with whether or not they can do what they claim to do. Lots of people throw lots of money at diet pills, diet programs, diet camps, which promise unbelievable health benefits, but still don’t lose any weight. Some diet product (and vitamin, and health food, and, well you get the picture) companies are incredibly prosperous. Similarly, lots of people throw lots of money at companies promising unbelievable credit benefits. They will take your money, churn out more ads, take more money, and then close up shop. It’s as simple as that. Don’t hire a credit counselor unless the counselor meets one of the following conditions:

The service is free (i.e., one of the consumer credit counseling services or similar non-profit organization affiliated with a national organization) or…

has a license that took a long time to earn, and which can be lost for malpractice (i.e., a lawyer). Lawyers are pretty expensive, but have a lot to risk for giving you bad or misleading advice. Try the above first, and if they don’t work out for you, hire a reputable lawyer.

Post-Bankruptcy Issues

After bankruptcy, you may receive solicitations from companies promising to restore your credit scores, to cancel out the effect of bankruptcy and even promising to erase the bankruptcy filing from your credit record. Again, the fine print might say:

“We can only remove erroneous reports of bankruptcy filings. If you actually filed for bankruptcy, then such cannot be removed from your credit history.”

(STEP – 1) Do make sure that your credit history is correct. Contact Equifax, TransUnion and TRW/Experian. Order and study the report they will provide (average cost $8-10 each) and follow the steps which the credit reporting agencies require to correct the erroneous information.

(STEP – 2) Pay off any current and new loans successfully and timely. Time and distance, a steady job and a good payment history between your past credit problems and your current loan application, is the best way to successfully land new credit.

(STEP – 3) Save and invest at least a small amount of your income to prove that you have the discipline to do so. This will further help to demonstrate to a potential creditor that your credit problems are in the past.

(STEP – 4) If you are turned down for credit, don’t leave mad. Rather, leave the lending officer with a good impression of your stick-to-it-iveness. Tell him or her that you’ll be back next year to try again. Repeat steps 1-3, and come back.

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